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EUR/USD Long In Profit After Fed's Dovish Shift

EUR/USD: long at 1.1355, take profit at 1.1580, stop-loss at 1.1255, entry date: 22.01.2019

USD/CAD: short at 1.3350, take profit at 1.3010, stop-loss at 1.3485, entry date: 22.01.2019

AUD/USD: long at 0.7145, take profit at 0.7350, stop-loss at 0.7050, entry date: 21.01.2019

Market Overview

The U.S. Federal Reserve held interest rates steady and, in a formal policy shift, vowed to be patient in further lifting borrowing costs.

Citing rising uncertainty about the U.S. economic outlook, Fed Chairman Jerome Powell said the case for raising rates had "weakened" and, in a statement, the U.S. central bank dropped its earlier expectation for "some further" tightening.

The U.S. central bank said continued economic and job growth was still "the most likely" outcome. But it removed language from its December policy statement that risks to the outlook were "roughly balanced."

The downgrade in the Fed's language around rate increases included a change in its description of economic growth from "strong" to "solid," and it noted that market-based measures of inflation compensation have "moved lower in recent months."

The Fed also shifted to a more dovish stance on its ongoing shedding of assets, saying it was prepared to adjust its plans based on economic and financial developments.

Powell, speaking to reporters after the end of the Fed's latest two-day policy meeting, said the central bank would likely stop trimming its balance sheet sooner, leaving it with more assets than previously expected.

Taken together, the balance sheet announcement and the shift on rate hikes was meant to convey maximum flexibility from a central bank buffeted in recent weeks by financial market volatility, signs of a global economic slowdown and a partial U.S. government shutdown that clouds the economy.

After the Fed statement, the dollar and short-term yields fell as investors gauged an even lower probability of additional rate hikes any time soon.